RALEIGH – As Democratic and Republican officials in Washington continue to spar about how best to close the federal government’s massive budget deficit, there appears to be agreement about the need to reduce or eliminate the billions of taxpayer dollars squandered on agriculture subsidies.
I’m not going to get my hopes up, yet. I well remember in 1995 when the newly Republican Congress talked up its plan to phase out farm subsidies. A version of the legislation was passed. Taxpayers saved a little money in the short run. But the subsidies never went away.
At least the two sides are saying the right things, however. The case for federal programs to prop up prices, subsidizing lending, or buy commodities from farmers has never been strong. In today’s global market for food and fiber, it is risible.
Here in North Carolina, where agriculture continues to be a core industry, it is important not to misunderstand the stakes. Farming is mostly a market-driven business in our state. Many commodities produced in North Carolina are completely outside of the federal subsidy system. Others receive much less “help” from Washington than they used to.
It would be preferable for the market-driven segment of agriculture to grow further and the government-driven segment to shrink. More generally, an end to agriculture subsidies would confer significant net benefits on North Carolina – because the current policy imposes net costs on us.
Consider these two facts. According to the Census Bureau, North Carolina is the 10th most-populous state. And according to recent reporting by Triangle Business Journal, North Carolina ranked 20th in the amount of farm subsidies received – $4.8 billion worth since 1995.
The money Washington uses to pay American farmers, subsidize their insurance, and cover crop losses after storms all comes from American taxpayers. It is very likely that North Carolinians pay more in taxes to subsidize agriculture than North Carolina farmers receive in agriculture subsidies. At the very least, it would be more efficient for federal programs to end and for the state to redistribute income directly from North Carolina consumers and non-subsidized farmers to subsidized farmers without having to employ Washington as a middleman.
At best, all such redistribution would end. As I wrote several years ago, arguments for continued subsidy are often more about nostalgia than economics:
Markets are unstable, even volatile. Industries and businesses change over time in response to experience, exploration, invention, and innovation. Try as you might, you can’t force the outcome of competitive markets to correspond to your idealized picture of how people should live and work. Agriculture remains a large sector of the North Carolina economy, even though employment is minuscule, because of massive gains in productivity. Show me a state or country with a large percentage of its citizens engaged in farming, and I’ll show you persistent, grinding poverty. If the goal is maximizing the availability of farm products at the lowest possible price, then the fact that agricultural productivity continues to surge is good news.
For many self-styled champions of the family farm, however, maximizing the availability of farm products at the lowest possible price is manifestly not the goal. Following the lead of Europeans, they seek to preserve farming as a tourist attraction, or as a means of frustrating evil suburbanization, or simply as a piece of nostalgia to remind North Carolinians of how their parents and grandparents used to live.
None of these goals can justify the costly taxes, subsidies, and regulations necessary to “save the family farm.” If enough folks would pay money for the opportunity to take their kids out to the country to see how their grandparents lived, that sounds like an excellent market opportunity for entrepreneurial family farmers willing to moonlight as historical re-enactors. And if would-be tourists wouldn’t pay for it, what’s the point?
Hood is president of the John Locke Foundation.